Electrification On Target For 2050 With Low-carbon Technology Shifts Emerging

Transpower has released its March 2023 Whakamana i Te Mauri Hiko monitoring report. These six-monthly reports provide a window into Aotearoa New Zealand’s energy transition, tracking the sector’s progress against future energy scenarios. March’s monitoring report suggests steady progress toward electrification targets across a number of key industry metrics. The pipeline of grid connection enquiries continues to rise,with sufficient generation in the mix to meet the 2050 net zero emissions target. A corresponding response is being observed from the demand side, with electricity distribution businesses planning increased capacity to meet potential load growth from process heat and transport sectors. The report also points to the rapid evolution of new low-emissions options and alternative fuels in the mix, with growth in sustainable aviation, hydrogen and utility-scale solar exceeding original Whakamana i te Mauri Hiko scenarios.

Following the clear ramp up of new generation enquiries in 2022, Transpower continues to closely monitor the pipeline of utility-scale generation projects. Firm interest in wind and solar continues, with grid-scale solar currently making up approximately half of the new connection pipeline. While this points to a highly renewable energy future, the central challenge for Aotearoa New Zealand remains the management of peak electricity demand. Peak demand growth has risen 2% on average in both 2021 and 2022.Ensuring there are clear market signals to incentivise firm generation and flexible demand will be crucial for ensuring the future security of supply for New Zealand’s electricity system.

The report notes the rapid evolution of three major technology and fuel shifts that will impact Aotearoa’s decarbonisation journey: clean aviation, green hydrogen and grid-scale solar. Transpower’s General Manager Customer and Strategy Chantelle Bramley says,“While these new fuels and technologies are still linked to increased electricity demand, they may significantly alter the shape of our energy future. ”Final technology and fuel mix options remain uncertain in clean aviation, but it is a notable opportunity for decarbonisation and demand growth. MBIE has also identified significant potential for the production and distribution of green hydrogen, which Transpower calculates could generate up to 88 TWh demand by 2050. The accelerated uptake of grid-scale solar, which has clearly overtaken residential installation, is a development that was not expected to occur until 2035. These departures from original Whakamana i Te Mauri Hiko forecasts emphasise the importance of ongoing monitoring throughout the energy transition to ensure sector intelligence remains acute.

Transpower’s monitoring suggests we remain consistent with the base case Accelerated Electrification scenario, on track to progress the large-scale transformation of energy in New Zealand. While future decarbonisation pathways are evolving, this also points to future opportunities in the push to a more renewable electricity system.

Report highlights include:

• Three major technology changes that will impact Aotearoa’s decarbonisation journey – Our assumptions of the future decarbonisation pathways for New Zealand are being reset by the rapid evolution of low carbon technologies, fuels and new demand sources. Clean aviation is a notable recent opportunity for decarbonisation (currently accounting for ~9% of NZ annual emissions). Traditional jet fuel may be replaced through a mix of fuel and technology options, but any solution will have significant impact on electricity demand. MBIE has also recently identified enormous potential electricity demand growth in the production and distribution of green hydrogen. Though figures are dependent on a number of factors, total electricity demand from production of green hydrogen could exceed 88 TWh in 2050. Grid-scale solar has also outstripped original predictions with a potential of 7,360 MW connected by 2030, well outpacing distributed solar.
• New grid connection enquiries and renewable energy continue to increase –The total potential capacity of generation in the pipeline has increased by 3 GW to 30 GW over the last six months. This suggests ample renewable production to meet our Accelerated Electrification scenario of 22 GW total installed capacity by 2050. However, as most of this is variable renewable energy from wind and solar, it may require firming to produce enough capacity at any one time to meet peak demand (MWp) needs of the system. While steady interest continues, and regulatory support is in the offing, rising cost inflationary pressures may make it harder to finance new renewable generation projects.
• Strong renewable generation but challenges remain in meeting energy demand and peak demand - In the last quarter of 2022, renewable generation set the highest quarterly record since 1980, with a market share of 94.7%. However, challenges remain given the variability of our generation mix in facing growing peak demand. We have seen an increase of ~138 MW of peak demand growth per year over 2021 and 2022. The System Operator has released a paper noting the winter peak capacity challenge over the next three years. Looking forward, more firm generation and flexible demand will be needed, as well as non-network solutions.
• Electricity demand slows, but with strong signs of potential growth – Although a ramp up in annual demand is not being registered, drivers of base demand are slowly recovering from the COVID-19 pandemic and other indicators suggest that overall demand growth is imminent. There is almost 5,000 MW of total potential new grid capacity from active customer projects in the pipeline. While the majority of this is at early and advanced stages of the connection process, we expect some of this to mature to delivery stage. This signals a speed of change in the electricity landscape, with greater electrification of industry and transport, new data centres and major new residential developments.
• Process heat decarbonisation increases, driving potential growth in electricity and biomass –The Energy Efficiency and Conservation Authority (EECA) are developing several Regional Energy Transition Accelerators (RETA) to identify opportunities for a coordinated approach to regional process heat decarbonisation. An initial report has been published for the first programme in Southland and identified projects will be supported through the Government. Investment in Decarbonising Industry (GIDI) fund. Technology shifts in the form of high temperature heat pumps and alternative fuels are playing a role in this decarbonisation, with increased EECA and Government interest in biomass as an opportunity for fuel switching.
• Transport electrification – Increasing consumer concern about climate change and government-led incentives for zero and low emission vehicles has led to a significant increase in uptake of electric vehicles (EVs) –which have risen to1.6% of the total light vehicle (LV) fleet from 1% over the past six months. The Clean Car Discount has also led a surge in registration of hybrids as a low emissions alternative. As of February 2023, 37.2% of vehicles entering the fleet have a battery of some kind, as compared to 6.2% in 2019. Notably, new registrations of smaller vehicles (which have strong EV and hybrid consumer options), are losing ground to registrations of SUVs and utes, for which new fleet entries are predominantly (63%) ICE vehicles.
• Energy affordability needs to be maintained – While average household electricity bills have decreased from 2012 to 2022, over two-thirds of consumers are concerned about electricity becoming unaffordable over the next 10 years. This comes as the sector is grappling with rising wholesale prices thatwe expect will filter through to the prices householders pay.

For all our reports in the Te Mauri Hiko series, visit

https://www.transpower.co.nz/about-us/transmission-tomorrow

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